Large Firms Tend to Be

question 20

Multiple Choice

Large firms tend to be

• A) net users of trade credit.
• B) net suppliers of trade credit.
• C) firms with high levels of profitability.
• D) firms with low levels of inventory turnover and accounts receivable turnover.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets.

Current Assets

Current assets are those assets of a company that are expected to be sold, consumed, or converted into cash within one year or within the business's normal operating cycle.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, which require the use of current assets or the creation of other current liabilities to settle.

Working Capital

The difference between a company's current assets and current liabilities, used to measure its short-term financial health and operational efficiency.